Johnston Press has asked the trustees of its defined benefit (DB) plan to support a bid to overhaul the business due to pressure from heavy debts and declines in print sales.
According to the firm's half year results published on 2 August, the company board has started discussions with trustees about a potential debt for equity swap with its bondholders, following initial consultations with the largest shareholders and bondholders. The publisher owes £220m to lenders through bonds that are due to be paid by 1 June 2019.
Chief executive Ashley Highfield is working on the proposal where bondholders would wipe off some of the debt in exchange for shares, according to The Daily Telegraph.
However, the deal requires agreement from the trustees and The Pensions Regulator.
Highfield told the paper: "The pension trustees are a very important stakeholder. It is evident that there is common ground and everyone is broadly agreed on where we need to get to. There is a still a lot of work to get through. This is a business which we have long believed needed to transform, but once done, could return to growth."
Chief financial officer David King added: "We do meet the regulator and they are in contact with us and the trustees. I cannot tell you details of any deal as they are part of the ongoing discussions at the moment."
This proposal comes as the interim results show deterioration in the scheme funding from a year ago when some improvement was seen.
As at 1 July 2017 the scheme had a funding deficit of £53m and assets of £548m on the IAS19 accounting basis. The deficit is significantly worse compared to last year when the accounting deficit fell from £63m in January 2015 to £27m as at January 2016, after changes to the scheme rules following a medically underwritten study to review assumed life expectancy of the members.
A medically underwritten study was carried out by KPMG to identify the current health of a sample group of existing plan members.
The results of the study continue to be used to inform the mortality assumptions used for calculating the pension liabilities under the IAS19 measure.
Nearly every trustee is confident of the next stage in their scheme’s strategy, despite almost an equal number being forced to consider replacing plans within the prior 12 months, according to research by Barnett Waddingham.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.
Regulators must act now to impose some "proper regulation" to stop another defined benefit (DB) transfer advice disaster, saysTim Sargisson.
Opportunities for defined benefit (DB) schemes to pursue investment approaches that help repair the UK’s economy cannot stand in the way of improving member outcomes, Aegon says.